June 9, 2010

Agricultural Bank of China receives IPO approval

The Agricultural Bank of China (AgBank) has received regulatory approval for its planned initial public offering (IPO) in Shanghai, according to reports, a sign that the mega-sized deal is moving along.

The China Securities Regulatory Commission granted the unconditional approval to AgBank Wednesday (June 9), said the sources close to the deal, adding that the meeting did not discuss the size of the offering.

Beijing-based AgBank was initially expected to raise up to US$30 billion in a dual listing, which would be the world's largest, but concerns over the size of the IPO have grown recently.

An executive with the AgBank earlier dismissed reports that its government shareholders were pushing it to postpone its planned share issue due to weak market conditions.

Reports cited that AgBank's two state shareholders - the Ministry of Finance and Central Huijin - wanted AgBank to postpone its listing as it was having a difficult time drumming up interest in the sale. Central Huijin is the domestic arm of the country's sovereign wealth fund.

AgBank is now expected to get the green light from Hong Kong's stock regulator. However, the timing of the listing is still unclear, and the weak stock market and flood of fundraising plans by other lenders and companies have created some uncertainty about how much it will ultimately raise.

In a recent poll, analysts and traders suggested that AgBank could command a valuation of 1.5 times its book value. That would mean AgBank could raise close to US$20 billion, far from the US$30 billion that sources with direct knowledge of the process have said it was initially aiming for, which would have made it the world's biggest IPO ever.